ARTICLE
19 March 2024

New Federal Decree Law For Regulation Of The Accounting And Auditing Profession

AM
Awatif Mohammad Shoqi Advocates & Legal Consultancy

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Awatif Mohammad Shoqi Advocates & Legal Consultancy is fully accredited to offer legal services and representation in the UAE, catering to both local and international clientele based in the UAE. Our firm specializes in a diverse range of practice areas, including family law, criminal law, and civil law, as well as corporate and commercial law. We also have expertise in banking, maritime and transport, labour law, litigation and arbitration, and real estate. Leveraging our deep understanding and extensive experience in these fields, we are committed to providing our clients with tailored solutions and exceptional service.
In a remarkable development aimed at stimulating auditing standards and introducing greater confidence in business practices, the UAE has introduced the New Federal Decree-Law No. 41/2023 ...
United Arab Emirates Accounting and Audit
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Introduction

In a remarkable development aimed at stimulating auditing standards and introducing greater confidence in business practices, the UAE has introduced the New Federal Decree-Law No. 41/2023 on the Regulation of the Accounting and Auditing Profession.

Replacing the previous Federal Law No. 12/2014, this new Federal Decree signifies a pivotal moment in refining corporate governance standards and Anti-Money Laundering (AML) compliance.

Overview of the Federal Decree-Law Regulating the Accounting and Auditing Profession

Federal Decree-Law No. 41/2023 establishes a robust framework for the accounting and auditing profession in the UAE. It defines a Chartered Accountant as an authorized and licensed individual permitted to practice the accounting profession, including activities such as auditing, reviewing financial statements, and providing Other Confirmation Services.

Accounting Offices, and licensed entities practising following the law, must adhere to the standards set by the Ministry. The legislation emphasizes preventing individuals from assuming the role of Chartered Accountants outside the profession's defined scope.

Application of the Law

Chartered Accountants and accounting firms located onshore in the UAE are licensed by the Ministry to practice and provide auditing and related professional services. Similarly, Chartered accountants and accounting firms situated in financial-free zones like DIFC and ADGM that aim to offer auditing and related professional services onshore also fall under the regulations of the New Federal Decree-Law.

The New Federal Decree-Law provides clarity on professional services licensure, including internal audit services, consultancy in financial monitoring, approval of electronic information systems, assessment of financial risks, and services within the scope of professional standards approved by the Ministry.

The Law aims to regulate and improve the efficiency of the Accounting and Audit Profession, encouraging confidence within the business community and among investors. It also establishes rules for holding Accounting and Audit Professionals accountable if they engage in practices harmful to the business community.

Professional Obligations and Responsibility

The new decree Law outlines the obligations and prohibitions for professional practitioners, ensuring ethical and professional conduct in the accounting and auditing field. Articles 6 to 15, of the law stipulate that no individual or entity may engage in professional activities without obtaining the requisite licenses, as detailed in the Implementing Regulation.

Chartered Accountants are authorized to practice either independently through their offices or by working for licensed Accounting Offices. Accounting Offices are obliged to implement internal audit systems, maintain professional standards, and provide insurance for professional liability. The law also lists prohibitions for professional practitioners, such as engaging in unreliable trade activities, violating professional conduct codes, and having conflicting interests with clients.

Furthermore, Article 18 emphasizes the confidentiality of information, restricting disclosure except under specific circumstances. And mandates the maintenance of data, documents, and papers related to contracted activities for a specified period, reinforcing accountability and record-keeping practices. The Implementing Regulation supplements these provisions by detailing controls and procedures for record maintenance.

Disciplinary Measures and Penalties

The Federal Decree-Law No. 41/2023 includes a system of disciplinary measures and penalties to maintain the integrity and professionalism of the Accounting and Auditing Profession. Article 20 permits the Professional Compliance Committee to address violations, imposing sanctions such as written warnings, administrative fines ranging from AED 10,000 to AED 1,000,000, suspension of the Professional Licence from one month to three years, and, in severe cases, cancellation of the Professional Licence.

These disciplinary measures can be applied individually or in combination, depending on the nature and severity of the offence. Additionally, Article 21 outlines the procedures for responsibility, enabling the Ministry to refer cases to the Professional Compliance Committee. The Committee has the authority to recommend criminal proceedings in situations where the violation involves a criminal offence.

Article 23 provides practitioners with the right to file grievances against disciplinary sanctions. A specialized committee, including a judge and experienced individuals, is tasked with reviewing such grievances. The decisions of this committee can be further appealed to the competent Court of Appeal.

Furthermore, the law emphasizes the publication of results, committee decisions, and court judgments enhancing transparency and serving as a preventive against professional misconduct. Practitioners found guilty of offences may face not only legal consequences but also reputational damage through public disclosure of disciplinary actions.

Committee for the Development of the Profession

Articles 31 to 38 outline the establishment of a Committee for the Development of the Profession. The Council of Ministers, based on the Minister's recommendation, will form this committee, determining its members, competencies, and functioning system. This committee addresses grievances, sets professional standards, promotes Emiratisation, determines fees, and oversees the issuance of important regulations.

Conclusion

The enactment of the New Federal Decree-Law represents a significant step towards a more regulated and responsible accounting and auditing profession in the UAE. By emphasizing professional standards, and licensing requirements, and implementing disciplinary measures, this decree underscores the commitment to encouraging confidence within the business community and among investors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
19 March 2024

New Federal Decree Law For Regulation Of The Accounting And Auditing Profession

United Arab Emirates Accounting and Audit

Contributor

Awatif Mohammad Shoqi Advocates & Legal Consultancy is fully accredited to offer legal services and representation in the UAE, catering to both local and international clientele based in the UAE. Our firm specializes in a diverse range of practice areas, including family law, criminal law, and civil law, as well as corporate and commercial law. We also have expertise in banking, maritime and transport, labour law, litigation and arbitration, and real estate. Leveraging our deep understanding and extensive experience in these fields, we are committed to providing our clients with tailored solutions and exceptional service.
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